Refund of pre-deposit with limited interest ordered after time-barred reassessment made the demand unenforceable.

After assessment orders were set aside and the fresh assessment proceedings became time-barred, the assessee was treated as entitled to refund of the pre-deposit amount. The court also held that interest was payable on the refunded sum, but limited the period of liability because the commencement issue in a connected matter was pending before the Supreme Court. Interest was directed at 6% per annum from the date of the refund application until actual refund, while the earlier period was left open. The revenue was directed to remove the demand from its portal.

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Issues: (i) whether the assessee was entitled to refund of the pre-deposit amount after the assessment orders were set aside and the fresh assessment proceedings became time-barred; (ii) whether interest was payable on the refunded amount and, if so, from what date.

Issue (i): whether the assessee was entitled to refund of the pre-deposit amount after the assessment orders were set aside and the fresh assessment proceedings became time-barred;

Analysis: The objections had been allowed, the assessment orders were set aside, and the matter was remanded for fresh assessment. The fresh assessment was not completed within the period permitted, with the result that the demand could not be enforced. In these circumstances, the right to refund of the pre-deposit was treated as settled and recoverable by the assessee.

Conclusion: The assessee was entitled to refund of the pre-deposit amount of Rs. 2 lakhs.

Issue (ii): whether interest was payable on the refunded amount and, if so, from what date.

Analysis: The claim for interest was considered separately from the refund claim. The Court accepted that interest was payable, but limited the period in view of the pending challenge before the Supreme Court in the connected matter concerning the commencement of interest liability. Accordingly, interest was directed only from the date of filing of the refund application until actual refund, and the earlier period was left to abide by the Supreme Court's decision.

Conclusion: Interest was payable at 6% per annum from 15 February 2019 until the date of actual refund, while the claim for the earlier period was kept open pending the Supreme Court's decision.

Final Conclusion: The petition succeeded to the extent of refund of the pre-deposit and limited interest, and the revenue was directed to remove the demand from its portal.

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